A Story About Paying Off Debt and the Obstacles Along the Way


Why Paying Off Debt Is No Longer Our Top Priority

Now feels like a good time to write a back-to-the-basics post in the spirit of why this blog was created in the first place: to help us track our debt repayment. There have been so many other things to discuss lately - Lola Retreat, new job, goals both big and small - but while I was in LA for the retreat, I was reminded that the people who read this blog on a regular basis are primarily here to watch us get our financial act together. And that's why I keep chugging along with the $76K Project. I want to show people that it's possible to fix your finances even when you're late to the game.


Taking stock

As a quick review, we started our debt repayment journey back in April of 2017 when we realized that we were constantly overspending and needlessly living paycheck to paycheck, even though we were making a decent income (~$80K per year).

At that time, we were in debt to the tune of more than $76,000, including:

-a car loan ($1,550)
-three credit cards (just over $22,000)
-two student loans (just over $53,000)

Since then, we've paid off the car loan, the credit cards, and one of the student loans. Our total debt is now $37,850 and consists of one remaining student loan.

Other related events over the past 21 months:

-Both Fortysomething and I have changed jobs (I've changed jobs twice - once with a pay increase, once with a pay cut).
-We decided we couldn't afford to buy a house in our HCOL town.
-We moved from a somewhat affordable but noisy apartment to a not-very-affordable but peaceful duplex.
-We opened a savings account and built an emergency fund.
-We started contributing to our retirement accounts.

What's changed with our debt repayment strategy?

When we first started this journey, it was all about paying off debt. We were absolutely obsessed with this goal, and that was a good thing: it helped us obliterate some very bad debt quickly and efficiently.

But now that we've paid off a little more than half of our original balance, our priorities have shifted a bit, and we've been putting more towards retirement and savings.

I've come around to the idea that putting all of your disposable income towards debt is risky business if paying off that debt is going to take longer than a year or so. Sorry, Dave Ramsey.

Let's be honest: a lower student loan balance isn't going to help you pay the bills in the event of a job loss or other expensive emergency. And the likelihood of getting through two, three, four or more years of debt repayment without being smacked in the head by a financial anvil is highly unlikely. You've got to protect yourself. 

Then there's the issue of retirement. We are way behind in that department, and we need to start making up ground now by contributing more of our income to our 401ks, even if that means extending our loan payoff. 

One other thing: you only live once, and you don't know what's going to happen tomorrow. So I'm no longer sold on the idea of living so close to the bone to pay off debt that you don't let yourself enjoy life now.

It's true that there are things we no longer do or purchase. We don't buy books unless we have a gift certificate; we use the library instead. We don't travel internationally (for now). We don't buy furniture or other home goods until it's absolutely necessary (our friends think we have a very minimalistic design aesthetic, but in reality, we just can't justify shelling out the cash to make our home look HGTV-ready). We don't purchase new clothes that often, either; luckily, we live in a town where jeans and sweatshirts are high fashion. In other words, we don't spend our money on things that we don't care about or that don't serve us.


But we do go out to eat once every two weeks or so because it's something we enjoy doing as a family. We do go on frequent road trips. We do pay quite a bit to live in a place we love. And yeah, I did pay $600 to attend a two-day financial retreat. That was definitely a splurge. Sure, we could cut down on all of this and put that money towards debt, but life would be less fun. We're willing invest (yes, I see it as an investment) in the things we care about and that enrich our lives.

Getting our finances in order has helped us figure out what we truly value.

Where are we at?

Income: When I changed jobs last month, I took a $10K salary cut. That's equivalent to ~$800/month. After taxes and deductions for health insurance, my HSA, and our 401k contributions, we now bring in about $5200/month.

Emergency savings: We're working on building a $10K emergency fund. We're about halfway to that goal. $10K would get us through six months if one of us were to lose our job. Once we reach that goal, we'll move that money into a high-interest savings account to help keep up with inflation. This is our biggest priority right now - all of our "extra" money goes into savings.

HSA: I plan on maxing out my HSA to the full $7,000 this year. HSAs are awesome because (a) you're not taxed on the money you put into them, (b) you're not taxed when you take the money out, as long as you use it for medical expenses (before retirement age), and (c) once you hit a certain balance, you can invest your HSA money and let it grow. It's a freaking good deal. I'm contributing $250 per paycheck to my HSA; my employer will also make a contribution.

401Ks: Both Fortysomething and I have ramped up our retirement savings. He's putting in about 7%, and I'm putting in 10%. We both have employer matches. Our intention is to increase these contributions significantly over the next couple of years. To be honest, it's a little tough to see that money go straight out the door (well, straight into an account I can't touch for yearsssss), but I can no longer ignore a) the importance of compounding interest or b) the tax benefits that come with contributing to a retirement fund.

So where does that leave us with our debt repayment? 

Right now and for the next several months, we're paying only the minimum on the remaining student loan. That's $400/month. Once we top off our emergency fund and finish paying off our $2,500 campground membership, we'll increase it ~$1200/month. If we then proceed to put all of our bonuses and raises towards the student loan, we'll pay it off in approximately two years.

We might do that. We might not. It might take us a little longer, especially if we decide to focus on our 401Ks.

Since starting this blog, I've realized that personal finance is both simple and complicated. It's simple in that it comes down to saving more than you spend and investing in the things you value. It's complicated in that every financial decision comes with its own set of pros and cons, risks and rewards. It's not as straightforward as the financial talking heads on late-night cable TV make it sound.

I've also realized that you really can't apply the same financial strategy to every phase of life and to every situation. If I were 20 years old, with years of compounding potential ahead of me, then yes, I'd take a more "scorched earth" approach to debt repayment. I'd give all of my money to the student loan company and just get it done. But at 40+ years old, we're making up for some lost time, and that means paying off debt can't be the only priority or even the top priority - even though it feels really, really good.

I know some people will disagree. But that's okay! Personal finance is personal. That's why I don't give much advice on this blog: what's appropriate and best for our situation might not apply as well to yours.

I'd love to hear what you think. I'm especially interested to hear from those of you who, like us, are late to the financial game. How are you prioritizing your various financial obligations? What are your biggest challenges?



  1. I love that you're using an approach that uses the huge benefits of tax advantaged accounts like HSA & 401ks. Debt repayment is important and as you said, it feels good. But it's hard for a debt-focused strategy to win out over the approach of investing (say, 7% returns) PLUS tax deferral (depends on your situation, but often 12%, 22%, or more on top of the investment gains): the math is just so much in favor of what you're doing now.

    I'd personally argue it's best to max out all those tax advantaged accounts and then use the rest to throw at debt, but these are all good choices so you can't really go 'wrong' so to speak.

    1. Thanks, Done By Forty! Our conversation a few months ago re: debt payoff vs. investing really made me critique our approach. I still reallllly want the damn debt gone - $400 a month is a lot - but I also realllllly want to see our investments grow.

  2. I really, really love this--both your transparency and willingness to flex your goal to suit new information, and the example you set the rest of us for not falling into a "one size fits all" mentality. In my opinion, that breeds guilt, and guilt kills any self-improvement, especially where money is concerned. Yours is a really healthy, thoughtful path. Thank you for sharing this.

    1. Thank you! Yeah, I try to stay away from guilt - when it comes to finances, anyway. Just doesn't benefit us in any way. I'm pleased with our progress and want to stay motivated now that we've built up some momentum.

  3. I think this is a great strategy, and not that far off from what we are doing. I, too, started out late to the game (didn't start attacking my debt until I was 44), and because I have a lot of financial priorities, I've never been able to just go out it, full throttle. I wrote a blog post a while back, wherein I compared two types of debt payoff journeys: the commute v. the road trip. Same destination, just a different attitude and focus along the way.


  4. This is really awesome; look at the freedom you bought yourselves by getting rid of the worst of the debt. This whole journey is about getting to a place where you have choices, and I think you're making a great choice here �� And now you're able 2 years from having it paid off‽ That's incredible ��

  5. Thank you so much for sharing this awesome info! Keep posting

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  6. We (well, I)have made a similar decision. I was paying gung ho on our 401K loan (used for down payment last year) but decided to change gears and get more money in the savings as well as open a Roth (all my retirement is in a rollover and we are about to get our pensions pay out which also will need to go into a rollover. I still hope to pay the house off in 10 years but if it is 12-15? I can live with that. I will have the 401 loan paid off in no more than 2 years but definitely not 5 years.

    1. I totally relate. Something shifted for us a few months ago. Maybe it was the thought of an impending recession. Maybe it was the realization that I need to be able to duck out of a bad job situation. But we realized we needed more in savings. As for the 401k, there's such a tax advantage to socking money into retirement... It's hard to pass up.

  7. I love this! I really struggle with taking a balanced approach to finances. I really, REALLY want to be debt free (and we're getting closer, 23k to go!) but I also know that's probably not doable in a year, and so we divide our money between student loans, saving for emergencies, our 401k, and an "adventure fund" used for things like buying our dog and flying home for the holidays because I want to be able to feel like I'm still living, too.

    1. Exactly! That first year of debt repayment was pretty exciting, so I didn't feel like I was missing out. But ever since we paid off our credit cards last summer, I just don't feel as motivated to go scorched earth on debt. I want to enjoy my life!

  8. As someone in the middle of debt repayment who realized that my income is set to increase substantially over the next 5-8 years, I also felt that barebones existence in the name of shaving 6 months off a debt repayment wasn't worth it. Purposeful, values-aligned spending? Hells yeah! Misery with no savings net and losing some of the compounding interest? Not worth it. We're also working on striking a balance right now. I'm cheering you on!

    1. Thank you, Diana! That balance is so hard to find. Cheering you on as well!

  9. I couldn't agree more! When you are looking at being in debt for longer than a year, it does make sense to have a much larger emergency fund in place. We also couldn't give up the free money that comes with a company match.